Could Croatia Pay The Price For Netanyahu’s Teva Request? — Panjiva
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Could Croatia Pay The Price For Netanyahu’s Teva Request?

Health Care 168 Israel 9 U.S. 4088

Teva Pharmaceuticals has launched a significant restructuring program that will involve cost cutting equivalent to 18.6% of its current cost base by the end of 2019. The move will include “substantial optimization of the generic (drug) portfolio globally” including price rises and product terminations in the U.S. That follows a price-deflation led profit warnings from the company, as well as disappointing announcements from competitors including Mylan and Dr. Reddy’s as outlined in Panjiva research of August 16.

Panjiva data shows that Teva’s seaborne exports to the U.S. of generic drugs and precursors have fallen 13.1% on a year earlier in the three months to November 30 and by 33.3% since the second quarter.

TEVA TUMBLES

Chart shows U.S. seaborne imports by Teva in key drug and healthcare categories on a monthly (dotted line) and trailing quarterly average (solid line) basis. Source: Panjiva

The pricing pressure in the U.S. drugs market can be seen in average import values per gram, which fell 19.1% on a year earlier in October. That marked the 15th straight month of decline, though a 19.6% rise in volumes the lower prices are drawing more demand into the market at the same time.

DRUGS DEALT A BLOW

Chart compares U.S. imports of prepared pharmaceuticals (HS 3004) on a volume and value basis. Upper panel shows year-over-year change. Lower panel shows implied value per kilo (value divided by volume) on a 12 month trailing average basis. Source: Panjiva

The drop in average import values has been broad based. Cardiovascular drugs (including statins) having seen a 33.8% drop in the past three months on a year earlier, antidepressants a 16.5% decline and even the normally robust oncology sector having seen a 3.3% decline. A rare outlier has been anticonvulsants which climbed 82.4%, though the comparison period includes an abnormally low result for August 2016.

LOWER PRICES LEADING TO HIGHER SUPPLIES

Chart segments 15 therapy classes. X-axis shows change in volumes imported in past 3 months on a year earlier. Y-axis shows change in import value per unit. Bubble size indicates size of therapy group in value-terms Source: Panjiva

The restructuring is clearly welcome – the company’s stock price rose 12% on the news. The plan nominally allows for the closure of manufacturing facilities in both Europe and Israel.

Reuters reports that Prime Minister Benjamin Netanyahu has asked the company (which is headquartered in Jerusalem) to minimize job cuts there. In the past 12 months 26.8% of Teva’s U.S. shipments came from Israel with 18.2% from Croatia and 13.5% from Ireland. Facilities in the latter two may face pressure to close before those in Israel if the company agrees to the Prime Minister’s request.

INDIA GONE, WILL CROATIA BE NEXT?

Chart segments U.S. seaborne imports by Teva by country of origin. Source: Panjiva

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